Federal Legislation Threatens Smokers

Tobacco White Paper

By Fred Brown

If you are a smoker, or a user of any tobacco product at all, here are some things you need to know from two recent pieces of federal legislation, the State Children’s Health Insurance Program, or the SCHIP, and the Family Smoking Prevention and Tobacco Control Act (H.R. 1108).

Fact: The largest federal tobacco tax increase in history took effect April 1, 2009—The 62-cent increase raises federal excise taxes on cigarettes to $1.01 per pack, up from 39 cents. The tax increase, which will fund the State Children’s Health Insurance Program (SCHIP) for lower-income children, covers cigarettes, smokeless tobacco, and cigars.

Question: What if SCHIP is under funded? Will the states have to make up the shortfall, since the children’s health insurance program is partially funded by the states?

Fact: The House of Representatives passed legislation (Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq., or the Family Smoking Prevention and Tobacco Control Act, H.R. 1108), to give the Food and Drug Administration sweeping new powers over tobacco products. The bill passed the House, 298-112, but has not yet come up in the U.S. Senate. Sen. Richard M. Burr, Republican of North Carolina, the nation’s leading tobacco producing state, has threatened a filibuster. His opposition, however, is not much more than a token fight to satisfy his constituents.

Fact: Philip Morris supports the legislation, but other tobacco companies oppose it. Sen. Edward M. Kennedy, a prime sponsor in the Senate, plans to introduce a version of the House bill after a two- week Congressional recess. Mr. Kennedy will work for speedy passage, said his spokeswoman, Melissa Wagoner.

Fact: President Barack Obama supports the landmark federal legislation, and has said he will sign the bill.

Fact: The House bill was developed by Rep. Henry A. Waxman, Democrat of California, and will set up the Food and Drug Administration Center for Tobacco Products office to oversee tobacco products. That office would be financed by $712 million in fees assessed upon the tobacco industry. The Waxman bill has far-reaching powers which include the regulation and restriction of nicotine, the power to approve or reject new tobacco products and to expand marketing restrictions and warning labels.

Fact: The U.S. Department of Agriculture lists tobacco as “one of the top ten U.S. cash crops. The United States is fourth behind China, Brazil, and India in world production and third behind Brazil and China in exports.

Fact: North Carolina alone could lose an estimated 10,000 high-paying jobs in tobacco manufacturing if the FDA bill goes through as is.

Fact: From the Waxman bill: “It is essential that the Food and Drug Administration review products sold or distributed for use to reduce risks or exposures associated with tobacco products and that it be empowered to review any advertising and labeling
for such products. It is also essential that manufacturers, prior to marketing such products, be required to demonstrate that such products will meet a series of rigorous criteria, and will benefit the health of the population as a whole, taking into account both users of tobacco products and persons who do not currently use tobacco products.”

Fact: Taken directly from the Waxman bill: “The only way to effectively protect the public health from the dangers of unsubstantiated modified risk tobacco products is to empower the Food and Drug Administration to require that products that tobacco manufacturers sold or distributed for risk reduction be reviewed in advance of marketing, and to require that the evidence relied on to support claims be fully verified.”

Fact: The Waxman bill authorizes the FDA to set national standards controlling the manufacture of tobacco products, as well as public disclosure of amount of ingredients in the products; authorizes new and flexible enforcement authority and oversight of the tobacco industry; gives the FDA the power to regulate nicotine and other components in tobacco products; requires manufacturers to disclose research which has not previously been made available, as well as new research in the future on health and safety issues.

Fact: From the Center for Disease Control: Total United States expenditures on tobacco were estimated to be $88.7 billion in 2005, of which $82 billion were spent on cigarettes.

Fact: Tobacco is grown in 21 states. The largest tobacco producing states are Kentucky and North Carolina, accounting for two-thirds of tobacco grown in the United States. The number of tobacco-growing farms declined from 512,000 in 1954 to
approximately 57,000 in 2002 (latest year for which figures are available).

Fact: In 2005, consumers in the United States spend $2.61 billion on smokeless tobacco products, and more than $1 billion on cigars each year.

Fact: As of 2007, the average retail price of a pack of cigarettes in the United States was $4.20, but prices vary widely across states. The federal excise tax is 39 cents per pack of cigarettes (but just increased by the SCHIP). The median state cigarette
excise tax rate, as of January 1, 2008, was $1, but varied from 7 cents in South Carolina to $2.58 in New Jersey.

Fact: From the Alcohol Tobacco Tax and Trade Bureau: “There is currently no Federal law that prohibits Internet tobacco product sales. However, there is also no exemption from Federal laws for tobacco products ordered over the Internet.  Therefore, consumers who order tobacco products to be shipped to them from outside the United States are not exempt from payment of Federal excise tax and customs duties due on these products when imported.

In addition, consumers who use the Internet to buy cigarettes from vendors outside their State may be liable for their State’s cigarette excise and/or sales taxes, and a State may have prohibitions or restrictions on Internet or mail-order purchases of tobacco products, or may have special requirements for such purchases.  For information about State requirements, contact the agency in your State with authority for tax administration.  Under Federal law, cigarette vendors who sell and ship cigarettes into another State to anyone other than a licensed distributor must report to the State (1) the name and address of the person(s) to whom cigarettes shipments were made, (2) the brands of cigarettes shipped, and (3) the quantities of cigarettes shipped. (Jenkins Act 15 U.S.C. 375 – 378).

Fact: Report on tobacco economics for some states in 2007: Tennessee, 2007—Acres  Harvested: 19,980, Production (in pounds): 38,636,000, Cash Receipts: $75,823,000. Georgia, 2007—Acres Harvested: 18,500, Production (in pounds): 39,775,000, Cash Receipts: $60,856,000. Kentucky,  2007—Acres Harvested:  89,200, Production (in pounds):  190,560,000, Cash Receipts: $331,792,000.  North Carolina, 2007—Acres Harvested: 170,000, Production (in pounds): 383,420,000, Cash Receipts: $587,029,000.